How to make more money with your investment
A lot of people shy away from real estate investments because they don’t want to be a landlord. Others shy away from hiring a property manager because they believe they can save money by managing renters themselves. However, in many cases, hiring a property manager would be the smartest thing to do. Homeowners often rent property for less than current market value. Recently, At Home Hawaii came across an owner charging $1,800 per month when the value of their rental was $2,300 per month; by hiring a professional a homeowner can make more money.
Sometimes tenants move when homeowners are out of town or too busy to find a new renter right away. A homeowner charging $2,300/month in rent will lose $6,900 by taking three months to fill a vacancy. By hiring a competent property manager, that loss would be minimal or even avoided all together. The typical cost of a property manager for a $2,300 rental is $2,760 for the entire year, less than half of this projected loss.
A property manager can also help save thousands of dollars when homes need maintenance and repairs. By hiring a management firm, homeowners gain access to a network of reliable, licensed, bonded and insured contractors who have already been vetted for good pricing and quality work. By having a pro on your side, homeowners can avoid high-priced contractors, mistakes and rip-offs. Good maintenance and repairs also keep tenants happy and preserve, maintain and increase the value of the home.
Property Managers also tend to get higher-quality tenants. Think of tenant screening as the moat and draw bridge around your castle. You don’t want to let the drawbridge down and let anyone in. A thorough screening process is the moat and drawbridge resulting in reliable tenants. A well-written lease and professional manager further ensure that those renters don’t mess up, because while it's possible to get a bad tenant out of a home, it takes time and is a hassle. Property managers know they are better off never accepting bad tenants in the first place.
Screening tenants often begins with the first phone call. Knowing what questions to ask is important. It’s also important to know what you cannot ask to avoid discrimination claims. Pre-screening is also important when current tenants have not yet moved out – as it’s best to keep disturbances to a minimum, so that the outgoing renters will continue to cooperate with showing requests.
Property managers should know how to dig up facts about rental applicants and look for warning signs, such as having a criminal history. They should also analyze an applicants’ credit scores and look at their record of on-time or late payments and can calculate a debt-to-income ratio from their credit report by seeing their bills and the minimum payments they currently have. By allowing a management company to handle the screening, the owner shields themselves from rental scams and from discrimination lawsuits that result from an inconsistent screening process or a lack of understanding what constitutes discrimination. For example: Can people say “no pets” to someone with a comfort cat? A lot of professionals are unsure of current laws and case studies. A good manager keeps on top of these and other issues that affect owners. Avoiding bad tenants, scams and lawsuits is one of the most significant benefits a property management company will provide.
Homeowners also have fewer legal problems if they use a good property manager. Veteran landlords know it takes just one problem tenant to cause significant legal and financial problems. A good manager is armed with the knowledge of landlord-tenant code and will ensure that homeowners are not leaving themselves open to potential lawsuits. Avoiding a single lawsuit can more than pay for property management services, and spare an owner time and anguish. Property managers should also have contacts with attorneys that specialize in both real estate and contract law just in case things get sticky.
Property managers should find quality renters as quickly as possible to fill a vacant home. They can offer advise on improving and preparing the property for rent and often will oversee improvements to maximize revenue and rentability. Based on the location, size and condition of the home, a property manager will determine the best rent rate – If owners ask too much they are stuck waiting for a renter and if owners ask too little they are losing money every month. Determining optimal rent requires knowledge of the local market and data on recently rented properties.
Property managers also should have effective marketing techniques and know how to write appealing ads and how to take and post beautiful photographs in order to attract a large pool of candidates in a short period of time.
Reliable rent collection is one of the biggest advantages in using a property manager. Collecting rent on time is the only way for owners to maintain consistent cash flow, and tenants need to understand this is not negotiable. By hiring a property manager, there’s a buffer between the homeowner and the tenant. The manager is the one who has to listen to excuses, chase down rent, and when necessary, evict tenants. This avoids the renter dealing directly with or getting angry with the homeowner. Property managers have a huge advantage because tenants realize that they, unlike the owner, are just doing their job and are obligated to enforce the lease terms.
Hiring a property manager is taking the “next step” as an investor. Beginning investors tend to manage homes themselves. They do the yard work and all the maintenance and in the beginning it’s even fun. They have “an investment” property and enjoy collecting rent checks, but as time passes it becomes a chore. The property and the renter can get neglected. Bad experiences follow and then you’ll hear people talking about “tenant nightmares.” It’s best to hire professional property managers as soon as the joy of owning an investment starts to intrude on what the owner wants to do with his/her time - ideally before it becomes a hassle.
For many investors, their time is better spent in other areas rather than servicing their properties. By hiring a manager, owners have less stress and can live, travel and invest wherever they want without the constraint of needing to be near their properties. Many owners collect a check every month without ever seeing their property. The management fee of 10% of rent collected should be one of the best investments a landlord can make. See At Home Hawaii properties currently for rent.